Campaign and Caviar

January 11, 2005

Now that Mayor Michael Bloomberg has spotlighted how other politicians finance their campaigns with donations from companies doing business with the city, his own source of campaign dollars should come out of the shadows.

Bloomberg, of course, finances his own campaigns, allowing him to boast that he is above the “corruption” that other candidates face when they accept “pay to play” donations.

But Bloomberg’s money has a source too. His company makes deals, some of them worth tens of millions of dollars a year, to rent out computer terminals at about $1,350 a month each to provide financial information. Often enough, his customers also do business with the city government Bloomberg heads.

As reported, Bloomberg is pushing legislation to impose a $250 limit on campaign contributions from those doing business with the city. He is also working with the city’s Campaign Finance Board to offer a handy public database linking political donors and whatever business they do with the city.

It’s great news that investigations once taking many hours of painstaking work will be very easy to do—as if a subterranean lead pipeline has been unearthed and replaced with clear plastic tubing. Unless, that is, someone wants to trace the flow of candidate Bloomberg’s millions.

There, the pipeline is well buried. Now, I cannot say that the Bloomberg company draws even one cent of its $3 billion a year in revenue because its main owner is mayor of the nation’s largest city. Nor do I question Bloomberg’s honesty in the way he has questioned others’.

But as a matter of fairness and good policy, any pipeline leading from city contractors to a public official’s pocket should be more transparent than the rules now require.

The mayor’s sticky relationship with his company’s clients is carried out under terms of an opinion the city Conflicts of Interest Board issued on August 29, 2002. It disclosed the top 100 Bloomberg clients in alphabetical order, but didn’t indicate if they were city vendors or even how much business they do with the Bloomberg company. The list and other details were disclosed only because the board had the mayor’s consent to bypass the required confidentiality of its rulings.

The date alone shows the problem: It came long after the mayoral campaign and eight months into Bloomberg’s term. During that period, he named Merrill Lynch executive E. Stanley O’Neal (now the company’s chairman, CEO, and president) to serve on the board of the Lower Manhattan Development Corporation. Merrill Lynch, which helped propel Bloomberg to success through what the mayor’s autobiography called “a truly symbiotic relationship,” owns 20 percent of Bloomberg LP.

If the conflicts board had any problem with the O’Neal appointment, it never said so. William Cunningham, the mayor’s director of communications, said the “reputable” O’Neal was picked because the mayor wanted someone from a major downtown business.

Still, city employees are barred from providing any benefit to people or companies they are “associated” with. The board found Bloomberg was clearly “associated” with Merrill Lynch through their business and the mayor agreed to avoid dealing with the brokerage firm.

But as the panel noted in its opinion, it avoided determining whether Bloomberg was “associated” with any of the other 100 major companies he did business with.

The reasons it gave for skirting the issue were dubious. It said, for example, that none of the 100 customers provided more than 4 percent of the Bloomberg company’s revenue—or as much as $120 million a year, since the cost of all those little Bloomberg terminals major companies use adds up. The board said that if any customer provided 10 percent or more of the Bloomberg company’s revenue in the future, the mayor should seek further advice from the board: So the threshold of concern is $300 million.

The opinion also noted that the Bloomberg customers “are spread throughout the financial services industry.” If that implies Bloomberg LP is like some sort of utility that everyone in the financial industry has to use, it’s wrong. The company fiercely competes with rivals Reuters and Thomson Financial.

The conflicts board avoided making a real decision on the 100 companies and simply hoped for the best. It was a poor precedent: While Bloomberg has established a reputation for honesty, it doesn’t mean the next zillionaire business leader to seek city office will be made of the same stuff.

A better system of disclosure needs to be worked out so that rich politicians get the same level of scrutiny as their opponents. It’s laughable, given all the corporate wrongdoing that’s been exposed in recent years, to argue that wealthy candidates are automatically above “corruption” just because they don’t accept campaign contributions.